WEIZMANN INSTITUTE OF SCIENCE v. NESCHIS

March 16, 2004.

WEIZMANN INSTITUTE OF SCIENCE, Plaintiff, -against-, JANET C. NESCHIS, individually and in her capacities as Trustee of the Jacques and Natasha Gelman Trust dated November 18, 1997, and as Trustee of Trust Created Under the Last Will and Testament of Natasha Gelman dated April 23, 1993, ROBERT R. LITTMAN, individually and in his capacity as Successor of Trustee of the Trust Created Under the Last Will and Testament of Natasha Gelman dated April 23, 1993, and MARYLIN G. DIAMOND, in her capacity as Trustee of the Jacques and Natasha Gelmen Trust dated November 18, 1997, and as Trustee of the Trust Created Under the Last Will and Testament of Natasha Gelman dated April 23, 1993, Defendants ALICE ANN JUNG, et al., Plaintiffs, -against- JANET C. NESCHIS, et al., Defendants

The opinion of the court was delivered by: THEODORE KATZ, Magistrate Judge

MEMORANDUM OPINION AND ORDER

These consolidated actions were referred to this Court for general
pretrial supervision, by the Honorable Richard M. Herman,
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United States District Judge. Presently before the Court is a
discovery dispute about whether Plaintiffs have waived the attorney
 client privilege with regard to certain communications with their
attorneys. For the reasons discussed below, the Court concludes that the
privilege has been waived.

BACKGROUND

This action arises out of the modification of the by  laws of a
Liechtenstein foundation, which resulted in a change in the distribution
of the assets of the foundation. Plaintiffs claim that the modification
was the result of fraud and undue influence.

In 1985, Jacques and Natasha Gelman, who were wealthy philanthropists,
established the Anturia Foundation ("Anturia" or the "Foundation") in
Liechtenstein, into which they placed a substantial portion of their
assets. Mr. Gelman predeceased his wife, and Anturia's by  laws
provided that upon Mrs. Gelman's death the potential beneficiaries listed
in the by  laws would receive specified percentages of Anturia's
assets. Prior to their amendment in 1992, the Anturia by  laws had
included the Weizmann Institute of Science ("Weizmann") and members of
the Jung family, who were Mrs. Gelman's closest living relatives, as
beneficiaries of the Foundation. The Anturia by  laws were amended
in 1992 to eliminate the Weizmann Institute as a beneficiary, and to
substantially reduce the Jung's allocation of the assets, while
increasing asset distributions to Defendant Marilyn Diamond, Mrs.
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Gelman's former attorney, and Defendant Robert R. Littman, her
friend and companion. The amended by  laws also provided for the
distribution of most of the assets of Anturia to a New York inter vivos
trust (the "Trust") which Mrs. Gelman had established with the assistance
of Defendant Janet C. Neschis, her attorney, and Defendant Littman. The
Trust is controlled by Neschis and Diamond, Neschis's former law partner,
who serve as trustees. Neschis was also the executor of Mrs. Gelman's
Will. In her capacity as executor and trustee she has earned substantial
commissions. As a result of the amended by  laws of Anturia,
Littman and Diamond received substantial bequests from the Foundation,
and Littman was given custody of the Gelman's substantial collection of
Mexican modern art. Plaintiffs contend that Neschis, Diamond, and Littman
exercised undue influence over Mrs. Gelman at a time when she was
suffering from Alzheimer's disease and was mentally incompetent, and
caused her to make changes to the Foundation's by  laws, as well
as her Will.*fn1

Shortly after Mrs. Gelman's death, on May 2, 1998, counsel for the Jung
Plaintiffs wrote to one of the Anturia board members, raising questions
about the validity of the then  current by  laws, and
demanding that Anturia refrain from making distributions to any
beneficiaries while the Jungs further investigated. Anturia
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appears to have complied with the demand. By August 1998, the Jungs
had retained Liechtenstein counsel in connection with their claims
against Anturia. On January 21, 1999, the Lichtenstein lawyers for the
Trust and Trustees Neschis and Diamond served a demand on Anturia for
distributions to the Trust. When no distributions were forthcoming, on
July 16, 1999, the Trust served Anturia with a notice of arbitration. In
the period between the demand for distributions and the notice of
arbitration, Weizmann had contacted both a Swiss attorney (on March 8,
1999), and Dr. Peter Monauni, a Liechtenstein attorney (on June 30,
1999), regarding Anturia. Dr. Monauni was formally retained on July 14,
1999.

On October 14, 1999, an arbitration complaint was filed in
Liechtenstein, on behalf of the Trust, Neschis, and Diamond. On January
12, 2000, Anturia filed its answer to the arbitration complaint, and
simultaneously provided formal notice of the dispute to Liechtenstein
counsel for Weizmann and the Jungs, inviting them to join the arbitration
as interveners. Both did so, with Weizmann filing its formal pleadings in
March 2000, and the Jungs filing their pleadings in July 2000. The
arbitrators ultimately concluded that the amendments to the by 
laws were not procured by fraud or undue influence, and that the bequests
in the by  laws could be effectuated.

Plaintiffs contend in this action, inter alia, that the
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arbitration should not be given collateral estoppel effect because
they were not afforded a full and fair opportunity to have their rights
adjudicated there.*fn2 For example, they contend that they did not
become parties in the arbitration until after the arbitrators had been
selected by Anturia and the Trust. Plaintiffs also contend that the
arbitration should not be given preclusive effect because they were
compelled to participate, and they had diminished status and rights as
third  party interveners. It is this last contention which has
precipitated the instant dispute over attorney  client privilege.

Plaintiffs have asserted as one of their defenses to the claim that
they are collaterally estopped from relitigating issues determined in the
Liechtenstein arbitration, that they "essentially had no choice but to
join the arbitration." (Letter from Elise A. Yablonski, Esq. to Jane W.
Parver, Esq., dated Nov. 26, 2003, at 2, attached to Letter from Jane W.
Parver, Esq., dated Jan. 30, 2004 ("Parver Ltr."), as Ex. 2.) Moreover,
in a letter to the Court (Berman, J.) in the context of motions to
dismiss, Weizmann's counsel stated that Weizmann "has appeared as "third
party' in [the Liechtenstein Arbitration] because it was advised by
Liechtenstein
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counsel that if it did not, it might be precluded from contesting
the validity of the Anturia by  laws in any Liechtenstein
tribunal." (Letter from Leon Gold, Esq., dated Nov. 7, 2000 ("Gold
Ltr."), at 2, attached to Parver Ltr. as Ex. 3.) Defendants contend that

[b]ecause Plaintiffs have put their lawyers'
advice regarding Plaintiffs' decision to
participate in the Liechtenstein arbitration
directly at issue, Plaintiffs should be precluded
from asserting this argument in opposition to
Defendants' summary judgment motion unless they
agree to waive the privilege and allow discovery
with respect to the subject matter of their
lawyers' advice.

(Parver Ltr. at 2.) Plaintiffs respond that Mr. Gold's statement
did not reveal any client confidence and therefore did not give rise to a
waiver of the attorney  client privilege. Alternatively,
Plaintiffs argue that there has been no implied waiver of privilege
because Plaintiffs have

not contended, nor do [they] plan to contend, that
[they] relied on advice of counsel, or acted in
good faith, or had a reasonable belief of some
kind, in deciding whether to participate in the
Liechtenstein arbitration. Rather, [Plaintiffs']
argument is that [they were] in fact
compelled to take part in the Liechtenstein
arbitration by defendants' machinations and the
operation of Liechtenstein law.

The attorney  client privilege affords confidentiality to
communications among clients and their attorneys, for the purpose of
seeking and rendering an opinion on law or legal services, or assistance
in some legal proceeding, so long as the communications were intended to
be, and were in fact, kept confidential. See United States v.
International Brotherhood of Teamsters, 119 F.3d 210, 214 (2d Cir.
1997); In re Six Grand Jury Witnesses, 979 F.2d 939, 944 (2d
Cir. 1992), cert. denied, 509 U.S. 905, 113 S.Ct. 2997 (1993);
In re John Doe Corp., 675 F.2d 482, 487-88 (2d Cir. 1982);
Bank Brussels Lambert v. Credit Lyonnais (Suisse) S.A.,
160 F.R.D. 437, 441 (S.D.N.Y. 1995) (citing United States v. United Shoe
Machinery Corp., 89 F. Supp. 357, 358-59 (D. Mass. 1950)). The
privilege is among the oldest of the common law privileges and "exists
for the purpose of encouraging full and truthful communication between an
attorney and his client. . . ." In re von Bulow, 828 F.2d 94,
100 (2d Cir. 1987); accord United States v. Bilzerian,
926 F.2d 1285, 1292 (2d Cir.), cert. denied, 502 U.S. 813, 112 So.
Ct. 63 (1991). Thus, the burden of breaching the privilege is
particularly onerous.

The attorney  client privilege will be waived if the holder of
the privilege discloses or consents to disclosure of any significant part
of a privileged communication to a third party or stranger to the
attorney  client relationship. See In re Grand Jury
Proceedings, No. M-ll-189 (LAP), 2001 WL 1167497, at *7 (S.D.N.Y.
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Oct. 3, 2001); In re Kidder Peabody Sec. Litig.,
168 F.R.D. 459, 468 (S.D.N.Y. 1996). Moreover, " [a] defendant may not use
the privilege to prejudice his opponent's case or to disclose some
selected communications for self  serving purposes."
Bilzerian, 926 F.2d at 1292. To selectively disclose privileged
communications would cause the attorney  client privilege to be
used as both a sword and a shield, resulting in fundamental unfairness.
See id. Accordingly, where there has been a prejudicial
disclosure of some attorney  client ...

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